Tom Neff, fresh from bagging Mack for Morgan and McNerney for Boeing, is the headhunter of the moment. But Gerry Roche won't stand for that.

By PATRICIA SELLERS

July 25, 2005

(FORTUNE Magazine) – On June 13, the morning after Phil Purcell surrendered the CEO job at Morgan Stanley, Chuck Knight, the board member charged with finding his replacement,
placed a phone call to Tom Neff. A trim man with a shock of silver hair and a no-nonsense style, Neff specializes in finding new chief executives for America's top corporations, and
finding them fast. Morgan Stanley would be his trickiest search ever. That's because Knight, who with other key directors had stood by Purcell until his bitter but well-cushioned
departure (he's walking away with more than $100 million), had announced that several Morgan alums would not be CEO contenders. That list included ex-president John Mack, who had left
in 2001 after losing a bruising power struggle with Purcell. Neff thought Knight was making a mistake. "Morgan Stanley wanted an instantly credible, CEO-ready leader who knew the
business and could rebuild the company," says Neff. He told the directors that Mack must be a candidate--an opinion shared by many Morgan investors and executives.

Over the next week, Neff, who works for big search firm Spencer Stuart, presented 15 names--including Mack, UBS investment-banking boss John Costas, BlackRock CEO Larry Fink, and
former Goldman Sachs president John Thornton. He gave his view of each man's strengths and shortcomings. He spoke to seven of them--including Mack, whom he'd known well for more than
a decade. "Tom called me on my car phone one morning and asked, 'Would you be interested in chatting with the board?' " says Mack. (See box, "John Mack on His Plans for Morgan.") Neff
quickly arranged a dinner in a private suite at Manhattan's Carlyle Hotel for lead director Miles Marsh, Knight, Mack, and himself.

This was Neff's breakthrough. At the dinner, Mack for the first time told Marsh and Knight in detail about his struggles with Purcell, his distress, and his reasons for leaving. The
directors assured him they hadn't understood his side of the story. And by the end of the evening, they knew Mack was right for Morgan. Even though Knight and Marsh had met with three
other candidates in Neff's office (with Neff quietly observing, as he likes to do), soon after the dinner all the directors agreed on Mack. "It was the quickest, most intense, and
most publicly scrutinized search I've ever done," Neff says, exhausted--and for good reason. On June 29, the day the news broke that Mack would return to Morgan as CEO, Neff also
placed 3M chief Jim McNerney as the new boss at Boeing.

In the annals of CEO searches, no one has ever had such a big day--though one man disputes the significance of his feat. "Give me a break!" shouts Heidrick & Struggles's Gerry
Roche, Neff's longtime archrival, a voluble bear of a man who is as brash as Neff is reserved. Noting that Mack is Morgan's most prominent alum and McNerney was already on Boeing's
board, Roche argues, "Tom didn't find them. They were there." Roche further notes that he placed two FORTUNE 500 CEOs in two consecutive days in 2000--one of them McNerney himself, to
3M from General Electric--and brags that last year he bagged an unsurpassed load of CEO assignments. "Coca-Cola, Nike, Disney, Office Depot--the brands!" he effuses. "Tom hasn't done
that, I'll tell you." Responds Neff, quietly as usual: "The facts speak for themselves. The market shows I'm doing more business than Gerry." (It's true: Since 1997, Neff has led 26
FORTUNE 500 searches; Roche has led 21.)

Between them, Neff and Roche have a virtual lock on the high-level CEO headhunting business. Their firms, Spencer Stuart and Heidrick, each account for about 40% of such searches,
with Russell Reynolds a distant third. And these two are more combative--and more powerful--than ever. One reason: CEO turnover is at an all-time high. Studies indicate that the
typical major corporation replaces its chief about every seven years. Another: "Boards are so in the fishbowl today that they hire recruiters just to confirm that their in-house
candidate is the right choice," says Bill George, former CEO of Medtronic, who sits on the boards of Goldman Sachs, Exxon Mobil, and Novartis. The beauty of this business is that even
if the board winds up selecting an insider, the recruiter collects his fee--typically either a flat $1 million or one-third of the new CEO's first-year salary and bonus. Neff
acknowledges that Spencer Stuart's fees for both the Morgan and Boeing searches topped $1 million.

While Neff and Roche each personally lead only about five high-profile assignments a year, they have their hands in virtually every FORTUNE 500 CEO search that their firms take on. So
they largely determine who gets the most elite jobs at the biggest companies in the nation. It's hard to think of any other industry in which just two people wield such influence.
What's equally amazing is how long they've been at it. Tom Neff is 67; Gerry Roche turns 74 this month. They've been battling it out, search by search, CEO by CEO, for more than two
decades now. If anything, their rivalry has heated up this year, with Neff snagging Fannie Mae as well as Morgan and Boeing. Watching them at work is a window on how corporate America
picks its leaders. And it prompts an important question: Is the Tom and Gerry Show in the best interests of the companies these two men serve?

Fifty years ago, the very notion of a CEO recruiter would have been absurd. Chiefs of large corporations tended to reign unchallenged for decades, training loyal organization men to
succeed them. Corporate boards hardly ever went outside for new CEOs (they do so a third of the time today), and when they did they mostly approached candidates they already knew. The
headhunters that did exist--many working for consulting firms like Booz-Allen & Hamilton or tiny startups like Heidrick & Struggles--focused on recruiting midlevel executives.

But by the 1960s, hotter competition encouraged companies to venture further afield for top talent. That's when Gardner Heidrick, co-founder of Heidrick & Struggles, was busy
building his search business. One of his early hires, in 1964, was 32-year-old Gerry Roche. The son of a Scranton, Pa., grocer, Roche had flirted with the idea of becoming a Jesuit
priest, then launched a career marketing plastics. Hiring him would prove to be among the best decisions of Heidrick's life. For it was Roche, more than anyone else, who would end up
shaping the business of CEO headhunting. He did it on the strength of one thing: an insatiable appetite for schmooze.

When Roche began recruiting the mid-level managers who were Heidrick's bread and butter, he aimed high, cold-calling overqualified (and therefore ungettable) executives. "I got turned
down a lot," Roche says. "But with each person who turned me down, I built up relations." His first big break: an assignment to find a No. 2 for Bill Paley, the famously imperious
chief of CBS. And then to find another. And another. Throughout the 1970s, Roche found four No. 2's for Paley, who ultimately disliked every man he hired. But Paley demanded that
Roche hunt outside the broadcasting industry, and that helped him get acquainted with the top talent across America. "CBS made me," Roche says. "I got callbacks, and I turned people I
met into friends."

Many CEO searches followed--including the 1982 assignment to find a new chief for Steve Jobs' Apple Computer. John Sculley, president of Pepsi-Cola and the hottest consumer marketer
around, "said no to me five or six times," says Roche. But Roche knew that getting a candidate "to the altar," as he calls the final stage of a search, can take time--sometimes years.
"You do it with patience and by getting into their guts," he says. Knowing Sculley to be a lover of art and architecture, Roche lured him to Apple by likening Silicon Valley to
Florence during the Renaissance. "Gerry just has a way of connecting with people," says Sculley, whose ten-year tenure at Apple proved disappointing. "You just plain trust him, even
though you know he's been hired to get you. He makes you believe."

Roche boasts: "I've been doing this for so long that I know everybody." He maintains a Rolodex of more than 1,000 names, which he divides into three categories: 200 "cronies"
(including Jack Welch and former Honeywell CEO Larry Bossidy); 400 "prospects/suspects/sources/references"; and some 700 "others." Sometimes those categories overlap. In 2000 he was
counseling Welch on succession at General Electric, which gave him an edge when Jeff Immelt was anointed the next CEO. "Roche swept into action!" Roche says. In a frenzied two-day
period, he placed GE's also-rans, Bob Nardelli and Jim McNerney, as CEOs at Home Depot and 3M, respectively. He got the gigs largely because he happened to be buddies with Home Depot
co-founder and director Ken Langone and 3M director (and former Sears CEO) Ed Brennan.

Many days at lunchtime, you'll find Roche gossiping and glad-handing his way through Manhattan's Four Seasons. His regular spot is the restaurant's Pool Room, southwest corner table,
No. 9, the banquette facing east "so I can see the door." One recent day, during the usual high-stakes lunchtime bustle, a balding, 60-ish man swings by, embraces Roche, and pulls up
a chair. It's Neil Austrian, a man whom Roche has placed in two jobs--CEO of cable-TV network Showtime in 1984 and president of the NFL in 1991. Austrian returned the favor by hiring
Roche to do the CEO search at Office Depot last fall. They start complaining how tough it is to find great CEOs lately. "The supply and demand curves are working against us," says
Roche, sounding almost pained. "It's making searches much harder. Companies and candidates are more risk-averse, and spectacular candidates are saying, 'I'm just not ready to make the
change.' "

Talk eventually drifts--as it so often does when Roche is around--to Tom Neff. Austrian mentions that Neff is a friend. Roche can't help himself. "Tom who?!" he interrupts. "Oh, yeah,
I've heard of him." Amused by his own well-worn schtick, he adds, "I like to tell people, 'Neff's pretty good. I think he has potential.' " Roche chortles. "That drives Tom nuts."

Like Roche, Neff was raised Irish Catholic in a gritty eastern Pennsylvania town, Easton. Educated as an industrial engineer, he earned an MBA from nearby Lehigh University at night;
his first career was as a consultant at McKinsey. "What I was really good at was matchmaking," Neff says, "and my friends encouraged me to go into recruiting because I had helped so
many of them find jobs." His was hardly an auspicious start, however. In 1974, Neff was turned down for jobs by both Russell Reynolds and Roche himself. "He was too stiff, too
McKinsey, too proper," says Roche, admitting he made a "big mistake."

Neff landed at Booz-Allen and soon jumped to Spencer Stuart. There he got tapped to be CEO and led the firm for eight years, quadrupling revenues. Neff gave up the top post in 1985
when his first wife, Susan, died of breast cancer at 38, leaving him, at 47, with three young sons. "After she died and I was a single parent, I decided I wasn't going to fly off to
Brazil and Australia anymore," he says. Returning to full-time recruiting, he set out to be No. 1. Neff's opening threat to Roche's supremacy: placing Lou Gerstner at RJR Nabisco--the
largest company ever to hire a CEO recruiter--in 1989. "And he's been riding that ever since," Roche grouses.

How does Neff compete against the charismatic Roche, who happens to work in the Park Avenue office tower next door? By being everything that Roche is not--deliberate, methodical, and
famously discreet. He sometimes won't even tell his wife, Sally, what he's working on. "It's like being married to the CIA," she says, rolling her eyes. Neff goes to the Four Seasons
"only when I'm invited--it's so public." Most days around noon you'll find him eating a sandwich with a candidate or colleague in an office so spartan that it looks like a rental.

On every CEO assignment, Neff does loads of research--by himself, he points out. "Gerry has a dedicated researcher. I do my own." An admitted control freak, he prefers to interview
every director one-on-one at the start of a search to determine the "spec"--what kind of person the company needs, such as an experienced crisis manager or an organic-growth champ. He
relies primarily on a self-made list of FORTUNE 500 CEOs and presidents, which includes their birth dates and board memberships. From there, he comes up with an initial list of about
20 names for each search. Naturally, he persuades by appealing to logic. "If it's a No. 2 at a company," he explains, "I'll talk about the certainty of the CEO job, the bird in the
hand, vs. the uncertainty of staying where they are. I'll talk about the size, the complexity, the market position, the challenge, the equity opportunity."

Neff knows he must build tight relationships with FORTUNE 500 directors because it is they who hire a headhunter when a new CEO is needed. To that end, he has become the world's
preeminent recruiter for open board seats. "It's been strategic," Neff says. He beat Roche for the Boeing CEO assignment largely because Neff had found two new directors for that
board last year. "Gerry is a really good friend of mine," says Lew Platt, former chief of Hewlett-Packard who led the CEO search at Boeing, "and it would have been easier to give the
assignment to him. But Tom knew the company a little better, and the board knew him a little better."

Neff often wins coveted searches by doing more meticulous research than Roche. Two years ago, for example, Motorola was preparing to replace Chris Galvin, the founder's grandson who
was floundering in the job. Director John Pepper, the chair of Motorola's CEO search committee, was leaning toward awarding the search to Roche, since Roche had been advising him
gratis. But Neff and his Spencer Stuart colleague Jim Citrin, a tech and media specialist who may be the next generation's star CEO recruiter, worked through the weekend compiling an
analysis of Motorola and a list of possible candidates. "We did a minisearch," says Neff, who got the documents to Pepper by Monday. "It was a remarkable package," recalls Pepper.
Spencer Stuart got the job.

But research doesn't always trump force of personality. Consider the day last October when Roche and Neff faced off before the Disney board in the so-called shootout for the
assignment to find CEO Michael Eisner's successor. Says Citrin, who spent about 100 hours devising the pitch with Neff: "We prepared what we think was the most compelling presentation
we've ever done." They used the full hour allotted to sell Disney's board. Roche delivered his spiel in 15 minutes. "I said, 'Here's who we are. Here's what we've done that relates to
you. Here are our references. Don't listen to us. Call them. Now what do you want to talk about?' "

Roche committed one faux pas during his pitch, repeatedly calling Eisner "Mike." (Roche has a habit of bungling VIP names. Roberto Goizueta, the late CEO of Coca-Cola, once curtly
corrected him for calling him Bob, saying, "I don't look like a Bob. I don't talk like a Bob. If you continue to call me Bob, we're not going to get along.") But as it turned out, the
flub helped Roche win Disney. A couple of weeks later, over lunch at Manhattan's Sky Club, Eisner told him that the misnomer signaled to Disney's other directors that Roche was not
aligned with him. This was important, since some investors were accusing Eisner of rigging the search to give the job to Bob Iger, his No. 2.

Roche and John Thompson, a Heidrick colleague, presented the board with an exhaustive collection of possible contenders: 20 on an A-list (known to include eBay CEO Meg Whitman and
News Corp.'s Peter Chernin), 18 on a B-list, and about 80 on a C-list. But chairman George Mitchell prohibited them from contacting candidates until four months into the search.
(Mitchell did not respond to FORTUNE's requests for comment.) "It was very, very frustrating," says Roche, declining to talk in more detail about the assignment. According to various
sources, by February the recruiters had delivered bios and comments on 13 semifinalists; so many names had leaked, though, and Iger was looking so much like a shoo-in, that key
candidates began withdrawing.

Iger got the job. Roche and Thompson got paid. Then came a lawsuit filed by ex-Disney directors Roy Disney and Stanley Gold alleging that board members broke their pledge to engage in
"a thorough, careful" search. Disney and Gold ended up dropping the suit, as well as others, early this month. Even so, it's clear that the Disney job was hardly Roche's shining
moment.

When asked why Tom and Gerry have such a stranglehold on CEO search, Jack Welch has a one-word answer: "Brand." That is, corporate directors are increasingly concerned that their CEO
searches be thorough and professional--and be seen by shareholders as such. Roche and Neff are the bulletproof choices.

But is it a good thing that just two people do so much of the nation's CEO hunting? Some critics say that it means the same old suspects come up again and again--after all, how wide
can two people cast the net? Both men admit that they fish for talent in the obvious pool: FORTUNE 500 companies. That's exactly what directors ask them to do, they say--and
interviews with directors suggest that they're right. One female chief executive goes so far as to blame Tom and Gerry for the dearth of women in CEO positions (only nine women lead
FORTUNE 500 companies). Neff replies, "That's nonsense. The reality is that there aren't that many women out there." Roche has a similar take: "The problem is the pipeline."

One thing that Neff and Roche have succeeded in doing, complain some corporate directors, is hike CEO compensation. Median total comp for FORTUNE 500 CEOs was $7.4 million last year,
according to Equilar, and many stars earn far more. Mack, for example, signed a contract that could have guaranteed him $25 million in his first year, though he later volunteered to
tie his pay to Morgan's performance instead. Says Charles Elson, a corporate governance expert at the University of Delaware who is on the boards of AutoZone and HealthSouth: "When
[Roche and Neff] identify someone, that person takes on a star quality. He or she thinks, 'I'm worth more because Gerry Roche or Tom Neff recruited me.' The price goes up."

Another compelling criticism is that Roche and Neff's very success limits their effectiveness. That's because in playing by industry rules, they cannot recruit executives that their
firms have placed in jobs or take top talent from companies where they've installed executives in the past year. So Neff can't pluck CEO prospects from Boeing, Fannie Mae, and Morgan
Stanley. Disney, Coca-Cola, and Merck, among others, are off-limits for Roche, who is forthright about the problem. "The single biggest operational issue we have is the off-limits
issue, because it prevents us from going after a lot of the best and the brightest," he admits. "The more business we get, the more talent is blocked for us." Roche says that Heidrick
has turned down large assignments from GE just so he and his colleagues can continue pulling talent out of there. "We want to keep GE open. It's too good a hunting ground," he says.

For FORTUNE 500 directors, the most pressing question is: Are these guys worth the money? (See chart for how Neff's and Roche's picks have performed.) Neff takes pride in the fact
that he has never had what he terms "a disastrous placement." Yes, he placed Ray Gilmartin at Merck, but Gilmartin had a respectable 11-year run until he fumbled at the end of his
tenure. "I've never had a CEO bounced for performance reasons," Neff says repeatedly. He even keeps track of his rivals' placements that don't work out. "Want to hear names?" he asks
during a chat in that tidy office. Springing from an English side chair and sticking his head out the door, he asks his assistant for his list. Paper in hand, he reads the name of
Roche's less-than-stellar recruits: Gary Wendt at Conseco, Dick Brown at EDS, Gary DiCamillo at Polaroid.

When Roche gets word that Neff has been dissing him, he goes ballistic. "He's out of line! I've heard that he uses that list competitively with clients, and I think it stinks!" Roche
promptly brings up one of Neff's placements, Leo Mullin at Delta Air Lines in 1997. "If Tom considers Delta a success, he's smoking something," he huffs.

And so the battle rages on. As Heidrick CEO Tom Friel says, "They're like two old lions circling around the pen, or maybe more like two little kids jousting." And just like kids, they
refuse to leave a game until it's over. When asked when he plans to retire, Roche muses, "The firm without Roche--I don't like the way that sounds." And when is Neff quitting? He says
flatly, "Not before Gerry." âñ